Apr 2017 AFR: 2.6%
Gift Annuity State Regulations

Arizona


Intestacy


General Definition

Any part of an estate not disposed of by will passes by intestate succession to the decedent's heirs. Sec. 14-2101(A). A decedent may exclude or limit the right of a person or class to inherit property by intestate succession. If that person or a member of that class survives the decedent, the property passes as if that person, or each member of that class, disclaimed the intestate share. Sec. 14-2101(B).

An heir must survive the decedent by not less than 120 hours or he is determined to have predeceased the decedent for purposes of the homestead allowance, exempt property and intestate succession. Sec. 14-2104. A child in gestation at the moment of the decedent's death is treated as living at that time if the child lives at least 120 hours after his/her birth. Sec. 14-2108.

Order of Distribution

Any part of the intestate estate not passing to the decedent's surviving spouse, or if there is no surviving spouse, the entire intestate estate passes in the following order to the following persons who survive the decedent:

  1. To the decedent's descendants by representation.
  2. If there is no surviving descendant, to the decedent's parents equally if both survive or to the surviving parent.
  3. If there is no surviving descendant or parent, to the descendants of the decedent's parents or either of them by representation.
  4. If there is no surviving descendant, parent or descendant of a parent, but the decedent is survived by one or more grandparents or descendants of grandparents, half of the estate passes to the decedent's paternal grandparents equally if both survive or to the surviving paternal grandparent or the descendants of the decedent's paternal grandparents or either of them if both are deceased with the descendants taking by representation. The other half passes to the decedent's maternal relatives in the same manner. If there is no surviving grandparent or descendant of a grandparent on either the paternal or the maternal side, the entire estate passes to the decedent's relatives on the other side in the same manner. Sec. 14-2103.

If any part of a decedent's intestate estate passes by representation to descendants, that portion of the estate is divided into as many equal shares as there are surviving descendants in the generation nearest containing one or more surviving descendants. Each surviving descendant in the nearest generation is allocated one share. Any remaining shares are combined and then divided in the same manner among the surviving descendants of the deceased descendants as if the surviving descendants who were allocated a share and their surviving descendants had predeceased them. Sec. 14-2106(A).

If any part of a decedent's intestate estate passes by representation to the descendants of either of the decedent's deceased parents or to the descendants of either of the decedent's deceased grandparents, that part of the estate is divided into as many equal shares as there are surviving descendants in the generation nearest the deceased parents, or the deceased grandparents, that contains one or more surviving descendants and to deceased descendants in the same generation who left any surviving descendants. Each surviving descendant in the nearest generation is allocated one share. Remaining shares are combined and divided in the same manner among the surviving descendants of the deceased descendants as if the surviving descendants had predeceased the decedent. Sec. 14-2106(B).

If there is no surviving issue of the decedent, or if no one is qualified to claim the estate, the intestate estate passes to the state. Sec. 14-2105.

Will Qualifications


Common Law or Community Property

Arizona is a community property state.

Capacity

The testator of a valid will must be at least 18 years of age and be of sound mind at the time of the drafting. Sec. 14-2501.

Drafting

Arizona recognizes professionally drafted wills, holographic wills and self-proved wills.

To be valid, a professionally prepared will must be in writing, signed by the testator or in the testator's name by some other individual in the testator's presence and by his/her direction. The will must be signed by at least two witnesses, each of whom signed within a reasonable time after that person witnessed the signing of the will by the testator. Intent that the document constitute the testator's will can be established by extrinsic evidence, including, for holographic wills, portions of the document that are not in the testator's handwriting. Sec. 14-2502.

Holographic wills are permissible if the signature and the material portions of the will are in the handwriting of the testator. Sec. 14-2503.

A self-proved will is valid if the testator's acknowledgment and affidavits or two witnesses are made before an officer authorized to administer oaths if evidenced by the officer's certificate, under official seal. The self-proved will must substantially comply with the sample form will provided by Sec. 14-2504.

Beneficiaries

A beneficiary includes, in the case of a decedent's estate, an heir, legatee and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary.

Modifications

A testator may revoke his/her will in whole or in part by executing a new will or by performing a "revocatory act" on the will such as burning, tearing, canceling, obliterating or destroying the will or any part of it. The testator is presumed to have intended the new will to supplement rather than replace an old will if the new will fails to make a complete disposition of the estate. In such a situation, the new will revokes the old only to the extent the new will is inconsistent with the old and each will is valid to the extent they are not inconsistent. Sec. 14-2507.

Probate Process


Naming of Executor/ Personal Representative

The executor or personal representative of an estate is appointed by the testator through a valid will. However, before an appointment is made, the will must be declared to be valid by a statement by the registrar of wills, or by the court in situations where a lawsuit is filed over the estate administration. Sec. 14-3102.

The order in which parties are nominated are as follows

  1. The person determined by a probated will including a person nominated by a power conferred in a will.
  2. The surviving spouse of the decedent who has not been disinherited.
  3. Other devisees of the decedent.
  4. The surviving spouse of the decedent.
  5. Other heirs of the decedent.
  6. If the decedent was a veteran or the spouse or child of a veteran, the department of veterans' services.
  7. Any creditor of the decedent may be named the personal representative after 45 days following the decedent's death.
  8. The public fiduciary. Sec. 14-3203.

Prior to appointment, a person named as the personal representative in a will may carry out written instructions of the decedent relating to the decedent's body, funeral and burial arrangements. Sec. 14-3701.

Admission to Probate

Once the appointment is made, the personal representative will be issued letters by the court acknowledging the party as the personal representative and the administration of the estate officially commences. Sec. 14-3103.

Submission of Will

To be effective, a will must be declared to be valid by a statement of informal probate by the registrar or an adjudication of probate by the court. Sec. 14-3102.

Notifications

Within 30 days of his/her appointment, the personal representative must give the heirs the name and address of the personal representative, the names of the devisees in the decedent's will, indicate that this information is being sent to persons who have or may have some interest in the estate being administered, indicate whether a bond has been filed and describe the court where papers relating to the estate are on file. The information must be hand delivered or sent by first class mail to each of the heirs and devisees whose address is available to the personal representative. If appointment is made in a formal court proceeding, this information need not be given to persons given notice of the formal proceeding by the court. Sec. 14-3705.

Inventory

One of the key duties of the executor of the estate is to take inventory of the estate and to determine what is able to be distributed after the payment of debts and taxes. Within 90 days of his/her appointment, the personal representative must prepare an inventory of property owned by the decedent at the time of death, listing each item's fair market value as of the date of the decedent's death, its nature as community or separate property and, if applicable, the type and amount of any debt on an item. Sec. 14-3706(A).

The personal representative may file the original of the inventory with the court and send a copy of the inventory only to interested persons who request it. If he/she elects not to file the inventory with the court, then the personal representative must deliver or mail a copy of the inventory to each of the heirs in an intestate estate, or to each of the devisees if a will has been probated and to any other interested persons who request it. Sec. 14-3706(B).

Homestead Allowance, Exempt Property and the Family Allowance

A surviving spouse is entitled to a homestead allowance of $18,000. If there is no surviving spouse each minor child and each dependent child of the decedent are entitled to a homestead allowance of $18,000 divided by the number of minor and dependent children of the decedent. Sec. 14-2402.

In addition to the homestead allowance, the surviving spouse is entitled to a value that is not more than $7,000 in excess of any security interests in that estate in the following:

  1. Household furniture.
  2. Automobiles.
  3. Furnishings.
  4. Appliances.
  5. Personal effects.

If there is no surviving spouse the decedent's minor and dependent children are entitled to the same. Sec. 14-2403(A).

The surviving spouse and minor children are entitled to a reasonable allowance out of the estate for their maintenance during the period of administration. The allowance may not continue for longer than one year if the estate is inadequate to discharge all allowed claims. Sec. 14-2404.

Debts and Distributions

One of the first responsibilities of the personal representative is to publish a notice to creditors once a week for three successive weeks in a newspaper in the county where the decedent dies announcing the appointment and the personal representative's address and notifying creditors to present their claims within four months after the date of the first publication of the notice or be forever barred. Sec. 14-3801(A).

The personal representative must also mail a written notice to all known creditors of the personal representative's appointment. The notice will ask the creditors to present their claim within four months after the notice published in the newspaper, or within sixty days after the mailing or other delivery of the notice, whichever is later. Failure of a notified creditor to respond will result in the claiming being forever barred. Sec. 14-3801(B).

If the assets of the estate are insufficient to pay all claims in full, the personal representative will make payments in the following order:

  1. Expenses of administration of the estate.
  2. Funeral expenses.
  3. Debts and taxes under federal law and claims.
  4. Expenses of the last illness of the decedent, including compensation of persons attending him.
  5. Debts and taxes with state law and claims.
  6. All other claims.
Sec. 14-3805.

If necessary to satisfy claims or creditors against the estate, the shares of devisees will be reduced in the following order:

  1. Property not disposed of by the will.
  2. Residuary devises.
  3. General devises.
Sec. 14-3902.

In Arizona, unless under direct court supervision or if the litigation has ensued, the personal representative is authorized to distribute the estate without court supervision or adjudication. Sec. 14-3704.

Estate/Inheritance Tax


There is no estate or inheritance tax in Arizona.

Income Tax Charitable Deductions and/or Credits


Arizona taxpayers may deduct charitable contributions on Schedule A of Form 140 in the same amount and manner as on the federal Form 1040, Schedule A. Sec. 43-1042(a).

Arizona taxpayers may claim a tax credit for voluntary cash contributions made to qualifying charitable organizations. Starting with the 2013 tax year, taxpayers do not have to itemize deductions to claim the credit for contributions to qualifying charitable organizations. The credit is limited to $400 for taxpayers filing as single, head of the household or married filing single and $800 for taxpayers filing as married. Any unused credit maybe carried forward an additional five years. ARIZ. REV. STAT. ANN. §43-1088.

Also, taxpayers may claim a tax credit for voluntary cash contributions to a Qualifying Foster Care Charitable Organization If a taxpayer makes a contribution to a qualified foster care charitable organization, he or she may increase the maximum credit from $400 to $500 (for those filing single, head of household or married filing single) or from $800 to $1,000 (for those that are married filing jointly).

Gift Annuity Requirements


Arizona, a "conditional exemption" state, regulates the issuance of charitable gift annuities under Arizona Revised Statutes Secs. 20-103 and 20-119. The statutes provide that charitable gift annuities are exempt from regulation as insurance provided the issuing charity satisfies certain conditions. Failure to comply with state law permits the donor to bring an action against the organization in court.

Exemption Qualifications

To qualify to issue a charitable gift annuity, the charity must: (i) be described in Sec. 501(c)(3) or Sec. 170(c); (ii) have been in continuous operation for at least three years (or be a successor or affiliate of a charitable organization that has been in continuous operation for at least three years), (iii) have at least $300,000 in unrestricted assets (cash, cash equivalents, or publicly traded securities exclusive of those assets funding the charitable gift annuity), (iv) have had an annual audit of the charity's operations prepared by an independent CPA for the prior two fiscal years and (v) provide a disclosure statement to the to the donor before entering into the agreement. A charity may not pay any commission, fee, or other form of compensation to anyone to anyone that is contingent on the donation or amount of the gift annuity, whether directly or indirectly (but excludes regular compensation paid by the charity to its employees).

Disclosure Language

The disclosure statement is particularly important in Arizona and must include the following (also, see sample): (a) the charity's name and address; (b) a description of the charity which includes its state of organization, its date of organization and its current operations; (c) an assertion the charity will provide additional financial information (including its most current audited and interim financial statements) to the donor upon request, which is to be conspicuous in at least 10-point, bold-face type; and (d) the following disclosure:

"A charitable gift annuity is not insurance under the laws of this state, is not subject to regulation by the director and is not protected by any state guaranty fund. This state and the department have not approved or disapproved of the charitable gift annuity being offered and have not determined whether any of the information provided to the donor is truthful or complete."

Reserve Requirements

Arizona does not require an issuing charity to hold any amount in reserve.

Annual Filing Requirements

No annual reporting or notification is required.

State Contact Information

Arizona Department of Insurance
Life and Health Division
2910 N. 44th Street, Suite 210
Phoenix, AZ 85018-7256
(602) 364-4457
(800) 325-2548

State Forms

For more information on state-specific form requirements, please contact Crescendo at 800-858-9154.
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